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All Hail the Prosumer

The successful utility of the future must master the adoption of new technology, especially information technology.

Mar 10, 2015

EDITOR’S NOTE: Richard S. Barnes is DNV GL’s new executive vice president of sustainable energy use. He recently agreed to respond to our questions. Many of his themes will be explored in The Energy Times Executive Briefing March 19 in Washington.

Energy Times: What will be the hallmarks of the successful utility of the future?

Barnes: The successful utility of the future must master the adoption of new technology, especially information technology. Utilities will use IT to more effectively manage their assets and engage with their customers as they take on the role of a “prosumer,” a customer that both produces and consumes energy. Utilities must work with regulators to develop new business models that allow them to operate in a distributed world where the cost recovery of the grid is decoupled from the amount of energy consumed. Utilities must be prepared to compete with new market entrants that have a stronger understanding of customer behavior and can bundle energy services with other value propositions such as security.

Energy Times: What are the main challenges that utilities must overcome as they adapt and grow?

Barnes: A main challenge that utilities will face is that they don’t know as much about their customers as other companies that they may compete with in the future. The smart grid may provide utilities with information on their customers via interval load profiles. However, when this is compared to what a cable/telephone/Internet service provider knows about the preferences and behaviors or their customers it is clear that utilities might not be in the best position to match services to customer needs. In order to grow and adapt, utilities may also need to take on more investment risk than what was necessary under the regulatory models in the past. They have to consider that their historical shareholders sought a safe, reliable return. The diversification record for many utilities over the last 20 years has a long list of failures with only a small number success stories.

Energy Times: When it comes to energy efficiency, what do you view as the “low-hanging fruit” for large commercial and industrial energy users?

Barnes: Control technologies provide considerable energy management opportunities for large energy users. In addition, nearly half the energy saving potential can be obtained through changes in operations and maintenance behavior. Leaky and poorly operated compressed air systems still exist in a large number of industrial facilities. Many spaces are over lit and the lights are left on when spaces are empty. Most energy management systems utilize less than 20 percent of their capacity.

Energy Times: What would be the magnitude of energy savings that can be achieved?”

Barnes: Large commercial and industrial energy users can save about 10 percent of their current consumption through behavior change and low-cost measures that can will pay for themselves within two years. An additional 10 percent savings can be obtained from investments in technologies with paybacks greater than two years.

Energy Times: What single thing can state regulators do that would most boost energy efficiency and renewables adoption?

Barnes: If state regulators could do only one thing, they should focus on establishing stronger standards that move new buildings in the direction of zero net energy and improve the compliance of building standards. However, the most important thing regulators can do is not to seek out a single mechanism that would boost energy efficiency and renewables adoption. A variety of policy initiatives including efficiency and renewable standards, energy ratepayer funding schemes for programs that reduce market barriers, financial incentives, and other research and development activities all play an important role in increased adoption of clean technology and practices.